BTI 2014 Bolivia Country Report

Transcription

1 BTI 2014 Bolivia Country Report Status Index # 39 of 129 Political Transformation # 37 of 129 Economic Transformation # 53 of 129 Management Index # 54 of 129 scale score rank trend This report is part of the Bertelsmann Stiftung s Transformation Index (BTI) It covers the period from 31 January 2011 to 31 January The BTI assesses the transformation toward democracy and a market economy as well as the quality of political management in 129 countries. More on the BTI at Please cite as follows: Bertelsmann Stiftung, BTI 2014 Bolivia Country Report. Gütersloh: Bertelsmann Stiftung, This work is licensed under a Creative Commons Attribution 4.0 International License.

2 BTI 2014 Bolivia 2 Key Indicators Population M 10.5 HDI GDP p.c. $ Pop. growth 1 % p.a. 1.7 HDI rank of Gini Index 56.3 Life expectancy years 66.6 UN Education Index Poverty 3 % 24.9 Urban population % 67.2 Gender inequality Aid per capita $ 46.6 Sources: The World Bank, World Development Indicators 2013 UNDP, Human Development Report Footnotes: (1) Average annual growth rate. (2) Gender Inequality Index (GII). (3) Percentage of population living on less than $2 a day. Executive Summary During the period under review, Bolivia embarked on the second phase of the political and economic transformation that began with the election of Evo Morales as president in December This transformation, in a very general sense, encompasses establishing a plurinational state that combines a plural democracy (representative and participatory) with a mixed economy. The 2009 constitution combines institutions of liberal and representative democracy with mechanisms of direct democracy and unmediated participation by civil society organizations. Ordinary state law is paralleled by indigenous systems of justice that have equal status. The liberal state is qualified by the recognition of indigenous forms of self-governance, and individual civil and political rights are complemented by far-reaching social, economic and collective (indigenous) rights. As regards the economy, the market economy is conceived of as one part of a plural economic order that combines private initiative with heavy state involvement in the economy a tradition since the 1952 revolution and communitarian and social, cooperative forms of economic organization. This project of profound transformation is broadly supported by the Bolivian population, particularly by the formerly marginalized sectors of society, but is highly contested by significant minorities, especially among the traditionally privileged sectors and elites. The current phase of the transformation was inaugurated by the general election in late 2009 which resulted in the reelection of President Morales and a two-thirds majority for his Movimiento al Socialismo (MAS) party in the new parliament. The phase starting in 2010 has, on the one hand, been marked by continuity in terms of the government s overall political agenda. Most notably, the popular election of the highest judicial organs, including the Supreme Court and the Constitutional Tribunal, in October 2011 concluded the transition to the new institutional order as envisioned by the 2009 constitution. On the other hand, recent years have been shaped by increasing tensions and open conflicts within the broader alliance of social forces that traditionally supported Morales and his MAS. This is best exemplified by the conflict concerning the plan to build a road through the Isiboro-Sécure Indigenous Territory and National Park (TIPNIS), which

3 BTI 2014 Bolivia 3 in 2011 escalated into an indigenous protest march against the government. The hotly contested consultation process in 2012 failed to resolve the issue. In addition to this high-profile conflict, the period under review saw myriads of single-issue, labor and local conflicts involving mineworkers, employees from the public health sector, universities and police. Given the continued weakness of the formal political opposition (from the center-right parties and the regional autonomy movements), challenges to the government and its political agenda have come from conflicts with and between social and indigenous organizations. At the same time, economic development has been smooth overall. The Bolivian government has continued to combine a focus on state-led development, emphasizing public investment and social policy, with countercyclical macroeconomic policies. History and Characteristics of Transformation Bolivia is one of Latin America s poorest countries, although it is one of the richest in mineral resources and soil conducive to productive agriculture. The disparities between its geographically, ethnically and economically heterogeneous regions are enormous, and have often led to strife and conflict. Of increasing political relevance in recent times has been the regional cleavage between the highlands, where the country s de facto or administrative capital La Paz sits, and the southeastern lowlands (the Media Luna), where successful agribusinesses and the gas fields are located. Bolivia is not only poor, but is one of the most unequal countries in Latin America. The indigenous majority of the population has been particularly affected by a historical legacy of continuous discrimination. The 2009 constitution recognizes a total of 36 indigenous peoples, the largest being the Quechua (approximately 30% of the population) and the Aymara (approximately 25%). The 1952 revolution of the Revolutionary Nationalist Movement (Movimiento Nacionalista Revolucionario, MNR) brought agrarian reform, the nationalization of the large mining companies, universal suffrage without literacy requirements, and a wide range of social policy legislation to the country. Between 1964 and 1982, civilian and military governments alternated in power. After 1982, a short and negotiated transition to democracy led to a relatively long period of uninterrupted democratic institutional stability that lasted from 1985 until President Sánchez de Lozada s forced resignation in October This period was characterized by the dominance of three political parties that governed in changing coalitions ( pacted democracy ). These coalition governments implemented a series of market reforms that involved the usual neoliberal package of liberalization, deregulation and privatization. In the 1990s, additional political reforms deepened decentralization and introduced popular participation at the local level. Though a significant achievement within the context of Bolivian political history, this pacted democracy had an exclusionary bias. Most of Bolivia s poor and indigenous people felt excluded and marginalized. The grievances associated with neoliberal reforms added to this. During the 1990s, indigenous and social movements increasingly challenged the system of agreements

4 BTI 2014 Bolivia 4 between elites. Between 2000 and 2005, a series of political crises erupted, characterized by massive social protests that forced both elected President Sánchez de Lozada (in 2003) and his successor Carlos Mesa (in 2005) from office. In the course of this period, the union leader and coca grower Evo Morales established himself as the leading representative of the diverse protest movements. In December 2005, Morales was elected president, becoming the country s first head of state of indigenous origin. Since then, Morales has led a process of decisive political change that has included a profound reshaping of the country s political system through constitutional reform as well as a change of course in economic, social and coca/drug policies. In 2006 and 2007, an elected Constituent Assembly wrote a new constitution, and after a revision of the constitutional draft by Congress in 2008, a broad majority (61%) adopted the new constitution in a referendum on 25 January In terms of economic and social policies, the Morales government has significantly increased the role of the state in the economy. In the course of the nationalization of gas, international gas companies were forced into new contractual relationships, the control of the state (and the state company Yacimientos Petrolíferos Fiscales Bolivianos, or YPFB) in the hydrocarbon sector was strengthened, and taxes on gas companies were increased. Based on rising revenues from hydrocarbon and mineral resources, social spending and public investment was expanded. Regarding drug/coca policies, the Morales government abandoned the U.S.-driven emphasis on coerced coca eradication. On the one hand this change included recognition of the coca leaf s traditional role in indigenous cultures, an increase in the level of legal coca production and trade, and a push for coca s international legalization. On the other hand, the government has tried to limit the volume of coca production via community-led forms of social control, while continuing counternarcotics efforts aimed at drug trafficking. Within Bolivia, these changes have been (and still are) heavily contested. Given a weak and fragmented opposition at the national level, the resistance against Morales has come primarily from regional autonomy movements based in the eastern lowland departments of the Media Luna and led by elected governors and civic committees. Recent years, however, have seen an increase in conflicts within the broader group of civil society organizations that previously supported Morales and the MAS.

5 BTI 2014 Bolivia 5 The BTI combines text analysis and numerical assessments. The score for each question is provided below its respective title. The scale ranges from 1 (worst) to 10 (best). Transformation Status I. Political Transformation 1 Stateness In Bolivia, there is no open challenge to the state s monopoly on the use of force. However, the state s actual presence does not extend to all parts of the country. Some regions are home to parallel power structures led by local landowners, narcotics traffickers or ethnic community organizations. Since 2005, regional movements demanding autonomy for the departments of Santa Cruz, Tarija, Pando and Beni (the Media Luna) have contested the central state s legitimacy and actual presence in these parts of the country. After violent outbursts in September 2008 and the adoption of a new constitution in January 2009 that integrates principles of regional autonomy, these demands are now largely pursued within the framework of the national constitution. In 2012, a six-day police strike for higher wages forced the government to call in the military to ensure public order. There is general acceptance among the actors involved of the Bolivian state and fundamental agreement about who qualifies as a citizen. Since 1952, all citizens have had the same rights, though many were de facto prevented from asserting them for many years. Since the first election of President Morales in late 2005, the factual limits to citizenship as perceived by groups traditionally subject to discrimination (the indigenous majority, in particular) have been clearly reduced. The 2009 constitution declares the state to be plurinational. This departure from the mainstream model of the nation-state reflects the country s strong ethnic identities, but stops short of undermining acceptance of the Bolivian state. The new constitution has in fact increased identification with the state among the indigenous majority (although there has been a significant revival of indigenous protests against the state in the period under review). At the same time, the new emphasis on the plurinational and indigenous character of the state has led to a certain alienation among non-indigenous sectors of society. In general, regional identities, especially in the Media Luna region, add to this relative distance vis-à-vis the central state. Question Score Monopoly on the use of force 7 State identity 9

6 BTI 2014 Bolivia 6 Church and state are separated, and religious dogmas have no noteworthy influence on politics or law. The 2009 constitution has eliminated the special status formerly granted to the Catholic Church. Under the Morales government, tensions between the state and the Catholic Church have increased, with the church bolstering its role as a religion-based interest group. There are functioning administrative structures in Bolivia. Although the state s physical infrastructure extends throughout the country, its practical administrative reach is not complete. According to World Bank development data for 2011, 88% of the Bolivian population has access to improved water sources, but only 27% has access to improved sanitation facilities. Overall infrastructure (roads etc.) is relatively poor, but the current government has significantly increased public investment in infrastructure. Limited resources and a lack of professionalism coupled with politicization and corruption restrict country-wide application of jurisdiction/access to the judicial system and the provision of law enforcement. Integrated Justice Centers have somewhat improved access to justice in marginalized areas. Indigenous (community) justice systems (officially recognized by the 2009 constitution with status equal to ordinary law) provide judicial functions, but also lead to tensions and conflicts with state law. No interference of religious dogmas 10 Basic administration 7 2 Political Participation Political representatives are determined by general, free and fair elections. There is universal suffrage and the right to campaign for elective office exists. On the whole, elections are conducted properly, and continued voter registration efforts since the mid-1990s (especially in rural areas) have rendered their outcome even more representative. Reforms in 2004 confirmed by the 2009 constitution broke up the monopoly held by political parties and enabled civic groups (agrupaciones ciudadanas) and indigenous organizations to present their own candidates. Combined with the emergence of the MAS party, which is broadly perceived as representing the interests and values of the indigenous and poor majority of the population, these measures have significantly increased the number of ballots cast in elections (and referendums), thus extending the factual universality of suffrage. In response to irregularities in the voter registration process, the National Electoral Court (CNE) produced a new, biometrically based electoral roll in There have been allegations of instances of voter fraud (in rural areas) and the abuse of state resources, and criminal charges have been made against opposition politicians. Nevertheless, the results of elections and referendums are not questioned in principle. The 2009 constitution introduced the popular election of the highest judicial tribunals members and, for parliamentary elections, established special electoral districts for indigenous minority groups in rural areas. Aside from elections, additional mechanisms of political participation are included (recalls, referendums, citizens legislative Free and fair elections 9

7 BTI 2014 Bolivia 7 initiatives, and direct participation by organized civil society in the design and oversight of public policies, for example). A 2010 report by UNDP Bolivia confirms a general perception among Bolivians that the political inclusion of and participation by groups traditionally facing discrimination (the indigenous, women and the poor) has improved. Elected rulers in principle have the effective power to govern. There are no nationwide veto powers or political enclaves. Under the Morales government, the clergy, landowners, business elites and external actors (e.g., the U.S. government and international financial institutions) have lost influence. In certain cases, regional bosses or mafia can limit the government s power to govern, as can social protests. Examples include instances of violent resistance by landowners to the implementation of agrarian reform, and the de facto influence wielded by organized crime related to the drug economy. Freedom of assembly and association is constitutionally guaranteed and not restricted in principle. Under the Morales administration, the state has relied far less on overt repression (including deploying the military and declaring a state of emergency) when confronted with mass protests than it did under previous governments. Nevertheless, the government does at times rely on intimidation and there have been individual instances of repression (e.g., against members of the 2011 indigenous march protesting the highway project through the protected TIPNIS area). Freedom of expression is generally guaranteed. The private media (newspapers, TV and radio) are pluralistic, but tend to privilege opposition views. The importance of state media which has a pro-government bias has grown throughout the Morales era. Tensions between the Morales government and the private media further increased during the period under review. A new anti-racism law, adopted in October 2010, was criticized by media owners, journalists and some international observers as an attempt to intimidate critics and as a violation of the freedom of the press, as the law allowed the imposition of economic sanctions and the temporary suspension of licenses for media outlets that publish racist ideas. In January 2011, new regulations tightened up the law s vague wording and softened penalties, laying the foundations for a restrictive interpretation of the law, according to Reporters Without Frontiers. In August 2012, on the initiative of the government, the public prosecutor s office opened a criminal case against two newspapers and a news agency for disseminating and inciting racism or discrimination. According to the 2011 telecommunications law, television and radio frequencies have to be distributed equally between the state, the private sector and community-based, small farmer and indigenous groups. In public statements, President Morales, his cabinet ministers and other political leaders have continued to occasionally attack the media (and specific media outlets). According to Freedom House, in the period under study there have been fewer threats and physical attacks against the news media than previously. Effective power to govern 8 Association / assembly rights 9 Freedom of expression 8

8 BTI 2014 Bolivia 8 3 Rule of Law Formally, the 2009 constitution envisions a clear-cut separation of powers, in particular between the three branches of the state that are to be elected in popular elections (executive, legislature, judiciary). The Electoral Organ is established as a fourth power, and vaguely defined civil-society rights to direct participation and social control introduce an additional form of (vertical) checks and balances. In the period under review, popular elections were held (in October 2011) for the highest judicial organs, including the Supreme Court and the Constitutional Tribunal, concluding the transition to the new constitutional order. Since January 2012, Bolivia has had, for the first time in history, three powers (executive, legislature and judiciary) with independent democratic legitimation. In practice, however, the separation of powers continues to be limited. This is, on the one hand, the result of entrenched practices related to the executive s meddling in legislative and judicial affairs, as well as of general patterns of politicization and corruption. On the other, it is due to the simple fact that the MAS party, since the general elections in December 2009, has had a two-thirds majority in both chambers of the new parliament. This has resulted in a fusion of powers (as is often the case in parliamentary systems) and has severely limited the ability of the opposition to control the executive, shape legislation and influence the pre-selection of candidates for judicial elections. Accordingly, the new judges are generally perceived as close to the government and the MAS. At the same time, however, women and indigenous people are now much better represented at the highest level of the judiciary (as in parliament) than ever before. In addition to these institutions of horizontal accountability, Bolivian democracy is also characterized by strong vertical checks and balances: subnational governments and strong social organizations that monitor and balance the power of the central government. The judiciary is traditionally the weakest branch of the Bolivian government and its formal independence continues to be restricted in practice. After Morales first took office in 2006, the situation at first deteriorated significantly: After a series of resignations up until May 2009, both the Supreme Court and the Constitutional Tribunal were effectively paralyzed. In February 2010, President Morales appointed temporary judges to the Supreme Court, the Constitutional Tribunal and the Judicial Council. It was only in January 2012, when the new judges elected in October 2011 took office, that an independent judiciary was restored. The opposition strongly criticized both the (parliamentary) process of pre-selecting candidates for judicial elections and the elections themselves. As a consequence, the proportion of blank and null ballots cast in the October 2011 elections was very high (40%), and the newly elected judges are generally seen as close to the government and the MAS. There is hope that the direct democratic legitimation of judicial organs may increase their relative autonomy over time. Since 2012, there have been some tentative early Separation of powers 7 Independent judiciary 6

9 BTI 2014 Bolivia 9 indications of such a change, such as the Constitutional Court s decision regarding the TIPNIS consultation, its ruling against the criminalization of desacato (insulting public officials) and against the retroactivity of the current anti-corruption law, as well as its declaring unconstitutional those articles in the Autonomy Law that allow for suspending elected authorities on the basis of a formal accusation. At the same time, however, traditional problems persist, such as the judiciary s administrative weakness, scarce resources, limited access for ordinary (poor) people, corruption and political influence. An additional challenge concerns the jurisdictional boundaries and coordination between the ordinary state judicial system and the indigenous justice systems that gained equal status when the 2009 constitution came into force. A corresponding law ( Ley de Deslinde Jurisdiccional ) passed in December 2010 constitutes only a first (if important) step in this direction. Officeholders who break the law and/or engage in corrupt practices are not systematically prosecuted, but they are regularly held to account, both legally and politically, when such behavior becomes public knowledge. During the Morales presidency, the government and the judiciary have launched selective anti-corruption campaigns against current and former officeholders from opposition parties, but also against members of the MAS party and close collaborators of the president. Attempts to address the lack of transparency and the structures of patronage behind the scandals, however, have been limited. The 2009 constitution and a 2010 law stipulate that anti-corruption legislation can be applied retroactively, a rule that the government has already made use of to initiate judicial action and propaganda campaigns against former officials and politicians of the opposition. However, in October 2012, the Constitutional Court ruled against this retroactivity clause. Institutional improvements (including a new Ministry of Institutional Transparency and the Fight against Corruption) have yet to show results. There is broad consensus that widespread corruption is one of the major problems confronting the Bolivian government but there is also strong resistance to systematic tackling of this problem. Civil rights are guaranteed in principle. However, they are still violated occasionally, and mechanisms to prosecute, punish and redress violations of civil rights at times prove ineffective. Equality before the law, equal access to justice and due process under the rule of law are not de facto guaranteed. Discrimination especially affects women (e.g., but not only, in cases of violence against women), members of indigenous peoples and residents in remote rural communities. The 2009 constitution gives ordinary state law and indigenous (customary) law equal status, giving rise to fears that such community justice might infringe the classical individual civil rights guaranteed in the Magna Carta. However, the constitution clearly states that the indigenous juridical systems must respect the right to life and to defense along with the other rights and guarantees established by the constitution. The corresponding law ( Ley de Deslinde Jurisdiccional ) is fairly restrictive in terms of the scope provided to indigenous law. Nevertheless, much will depend on how these new rules Prosecution of office abuse 5 Civil rights 6

10 BTI 2014 Bolivia 10 are implemented, given that clearly illegal, open violations of civil rights and even lynchings are at times justified by the perpetrators as expressions of community justice. 4 Stability of Democratic Institutions Democratic institutions exist and, in principle, perform their functions. The fact that Bolivian democracy enabled and survived the major political changes associated with the Morales government demonstrates a remarkable capacity, in general, to perform the most important functions of a democratic regime: to translate widespread public discontent with the status quo into political change, and to channel sociopolitical conflict in a way that prevents major bloodshed. Since the adoption of the new constitution by referendum in January 2009, presidential and parliamentary elections in December 2009, as well as departmental and municipal elections in April 2010, the new executive and legislative institutions have generally performed their functions. Since January 2012, this also holds for the highest judicial organs (with the caveats mentioned above). At the level of the central state, the two-thirds majority held by the MAS in the new parliament (the Plurinational Legislative Assembly) has enabled a political decision-making process featuring much less deadlock, antagonistic rivalry, disregard for procedure and counterproductive friction between institutions than formerly. The downside to this process has been manifested in frequent complaints about marginalization of the parliamentary opposition and a lack of broad social participation. At the subnational level, democratic institutions also generally perform their functions, but a number of departmental and municipal governments have seen a suspension of governors or mayors. Compared to the conflict-ridden years between 2003 and 2009, there has been a clear improvement in the capability of democratic institutions to perform their functions. All relevant political actors accept democratic institutions, but different groups often have different concepts in mind. Approximately since the year 2000, these differences had led to a situation where significant parts of the population and influential political actors rejected existing democratic institutions. First, it was the political forces and social groups associated with Morales and the MAS that rejected the old institutions of pacted democracy. Subsequently, it was the opposition to Morales, particularly the regional autonomy movements from the southeastern lowlands, that refused to accept the Morales government, the Constituent Assembly and the new draft constitution as legitimate. At the same time, Morales and the pro-government forces openly opposed the steps toward autonomy initiated in the Media Luna region. Since the constitutional referendum and the elections in 2009 and 2010, this stalemate of mutual non-acceptance has largely been broken at least as far as explicit political statements are concerned. A 2010 report by UNDP Bolivia found a generalized recognition that the government led by the MAS and Evo Morales constitutes the Performance of democratic institutions 7 Commitment to democratic institutions 6

11 BTI 2014 Bolivia 11 center of political power, and that the increased levels of indigenous participation associated with this government constitute a positive development. To be sure, deep political divisions persist below this very basic consensus, as does a general lack of respect for procedural rules. Yet, at the moment, the new constitution, the new parliament and the Morales government on the one hand, and the departmental governments and their general right to departmental autonomy on the other, are not openly called into question by any relevant political actor. Threats against, and the suspension of, oppositional departmental governors in connection with alleged corruption charges have caused some trouble, though in the end these conflicts were processed through the appropriate institutional channels (subnational parliaments) and may not be interpreted as a disregard of political institutions as such. Nevertheless, the prosecution and/or suspension of a series of oppositional officeholders at the subnational level in many cases not without reason but apparently also driven by (party) political motives constitutes a potentially serious problem for democracy. In February 2013, the country s Constitutional Court (Tribunal Constitucional Plurinacional) ruled unconstitutional the articles of the Autonomy Law that allow for the suspension of elected authorities on the basis of a formal accusation. 5 Political and Social Integration For many years, Bolivia has had an unstable (and unbalanced) party system characterized by high fragmentation, substantial polarization and high volatility due to the parties limited anchoring in society. On the whole, the party system continues to be unstable and only weakly anchored, but the governing MAS party constitutes a clear exception: Even if not an organizationally unified political party in the traditional sense, but rather an umbrella organization uniting a series of social movement organizations, the MAS is socially rooted, has relatively stable linkages with societal organizations and, since 2005, has received remarkably stable support in elections, referendums and opinion polls. Party system 6 While the MAS and especially its undisputed leader Evo Morales have proven able to articulate and aggregate a broad range of societal concerns and values, contemporary opposition parties have, for the most part, failed to do so. The traditional party system in place since 1985 finally collapsed in The 2005 elections established the Social and Democratic Power party (Poder Democrático y Social, PODEMOS), a conservative alliance led by former President Jorge Quiroga, as the leading opposition party to the MAS government. However, PODEMOS quickly disintegrated. The same happened to the conservative alliance formed with a view to the December 2009 elections (Plan Progreso para Bolivia-Convergencia Nacional led by presidential candidate Manfred Reyes Villa). A relatively stable, but minor force is Unidad Nacional (UN); this is led by businessman Samuel Doria

12 BTI 2014 Bolivia 12 Medina (who started his political career in the MIR), and occupies a rather moderate center-right position. A second, relatively institutionalized party is the Movimiento Sin Miedo (MSM). The center-left MSM emerged as a local party in La Paz, has governed this municipality since 1999 and was allied with the MAS until The MSM also has a minor but growing national relevance. At the subnational level, the MAS is again the dominant political party. However, there is a broad spectrum of diverse local and regional forces at this level; some of these entities have fairly stable social roots and represent institutionalized organizations. This is true, for instance, of the regional autonomy movement in Santa Cruz led by governor Rubén Costas, despite the fact that the departmental civic committee has recently lost much of its power. In general, these regional and local forces lack systematic representation at the national level. As a result, Bolivia s current party system combines a dominant majority force with highly fragmented and unstable opposition parties. The degree of polarization has lessened somewhat in comparison with 2007 and 2008, but is still high. At the same time, during the period under study, the broad alliance of social forces united behind the MAS has continued to erode. On several occasions, (former) social allies of the MAS (indigenous organizations, trade unions) openly challenged the Morales government, most notably in the context of the massive protests against the planned highway through the TIPNIS area. In general, cohesion within MAS and the progovernment camp depends very much on the president and the government s fiscal capacity to respond to a diversity of demands. There is a broad network of interest groups that reflect diverse and partially competing interests and values: organizations representing capital and labor, agriculture, and a number of area-specific and regional interests as well as indigenous peoples and communities. The spectrum of interest groups generally incorporates all (competing) interests and values, and no strong interests are able to dominate the rest. Nevertheless, the actors involved are often unwilling to cooperate, and competing groups at times go so far as to clash violently (e.g., in the period under study, state mine workers and cooperative miners). Interest groups 7 During Morales s first term in office, the various groups tended to ally and split along the country s primary political fault line: The traditional Bolivian trade union federation (COB), the national small farmers federation CSUTCB, indigenous confederations from the Andean highlands (CONAMAQ) and the lowlands (CIDOB) as well as powerful community organizations (e.g., the neighborhood committees in El Alto) joined the MAS and its member organizations (such as the federation of coca growers) in defending the Morales government. Meanwhile, the oppositional autonomy movements in the Media Luna region united deep-rooted civic committees,

13 BTI 2014 Bolivia 13 strong regional associations of businessmen, youth organizations and departmental governments. Since 2009, however, conflicts have erupted within the camp of (former) progovernment forces, in particular; both between interest groups and between social organizations and the state. Support for democracy, as measured in Latinobarómetro s opinion polls, is fairly high. In 2008, 2009 and 2010 around 70% of respondents declared democracy to be the most preferred political system. In 2011, the share was lower (at 64%), but this level of support still constitutes a remarkable increase from less than 50% in 2004 and 2005 and is also more than the average of 58% for Latin America as a whole (2011). Correspondingly, the share of respondents saying they would never support a military government has increased significantly (71% in 2011, with the Latin American average at 66%). With regard to actual democratic performance (the supply side), satisfaction with democracy has declined from an all-time high of 50% in 2009 to 32% in 2010 and 28% in 2011 (in , satisfaction ranged between 16% and 25%). Trust in specific democratic institutions is even lower: The 2010 data ranges from 17% (political parties), 24% (judiciary) and 28% (parliament) to 38% (armed forces) and 42% (government). Throughout the country, there are many autonomous, self-organized groups, associations and organizations. At the local level, a strong sense of solidarity tends to prevail. Many indigenous groups have rich and institutionalized communal and communitarian traditions. Even in urban settings characterized by a largely informal economy (e.g., in El Alto), the degree of social self-organization is remarkably high. Nevertheless, general interpersonal trust is relatively low, according to Latinobarómetro data. This mirrors the stark fragmentation along socioeconomic, regional and ethnic lines. Approval of democracy 7 Social capital 5 II. Economic Transformation 6 Level of Socioeconomic Development In Bolivia, social exclusion is still quantitatively and qualitatively widespread and structurally embedded. Significant levels of poverty combine with multiple social inequalities. However, during the last ten years, the poverty rate has declined significantly. According to Economic Commission for Latin America (CEPAL) data, the share of people living in poverty (defined in terms of basic needs) has been reduced, falling from 63.9% in 2004 to 54% in 2007 to 42.4% in The poverty rate in rural areas is higher (2009: 61.5%), but also remarkably lower than previous Question Score Socioeconomic barriers 4

14 BTI 2014 Bolivia 14 levels (2004: 80.6%; 2007: 75.8%). Still, almost a quarter (2009: 22.4%) of the population lives in extreme poverty (2004: 34.7%; 2007: 31.2%). Recent years have also seen a notable reduction in income inequality as measured by the Gini index: from (2007) to (2009). This reduction is clearly above the Latin American average and means that Bolivia is no longer among the countries in the region with the worst distribution of income. The UNDP has noted almost continuous improvements in human development since 1975; Bolivia s Human Development Index (HDI) score (0.663 in 2011) is in the medium human development category, giving the country a rank of 108 out of 187 countries. These improvements notwithstanding, dramatic inequalities persist. Socioeconomic discrimination affects indigenous peoples, rural areas and women, in particular. UNDP s Gender Inequality Index (2011) gives Bolivia a score of (slightly below average). A 2010 report by UNDP Bolivia concluded that increased political and legal equality has yet to translate into a systematic reduction in socioeconomic inequalities. This observation confirms the structural character of Bolivia s multiple socioeconomic barriers. Economic indicators GDP $ M GDP growth % Inflation (CPI) % Unemployment % Foreign direct investment % of GDP Export growth % Import growth % Current account balance $ M Public debt % of GDP External debt $ M Total debt service $ M

15 BTI 2014 Bolivia 15 Economic indicators Cash surplus or deficit % of GDP Tax revenue % of GDP Government consumption % of GDP Public expnd. on edu. % of GDP Public expnd. on health % of GDP R&D expenditure % of GDP Military expenditure % of GDP Sources: The World Bank, World Development Indicators 2013 International Monetary Fund (IMF), World Economic Outlook 2013 Stockholm International Pease Research Institute (SIPRI), Military Expenditure Database Organization of the Market and Competition On the whole, basic institutional conditions for market-based competition exist. Yet, there are significant imbalances between competitive export-oriented sectors (e.g., agribusiness), weak national industries and a huge informal and subsistence economy in both urban and rural areas. Under such conditions, efforts to increase market-based competition since 1985 have produced highly uneven results. The Morales government, in charge since 2006, has not sought to promote market competition further. Accordingly, the fundamentals of market-based competition were better secured in early 2005 than in Since 2005, the role of the state in the economy has expanded, and there is now substantial state participation and intervention in strategic sectors. This particularly concerns Bolivia s hydrocarbons sector, as the nationalization declared in 2006 has led to increased duties on gas and oil companies and restored the traditional state-owned petrol company YPFB as a major player in the sector. Further nationalizations have affected individual (foreign) companies in a variety of sectors (including mining, energy and telecommunications). Market-based competition was also deliberately limited by the Agrarian Reform Law of 2007 (reinforced by the 2009 constitution), which allows for the expropriation of land not fulfilling its economic and social function, and lays the groundwork for a more comprehensive and redistributive agrarian reform (see sections on Property rights and Private enterprises below). Administered prizes exist for petroleum products and potable water. The 2009 constitution envisions a plural economy consisting of communitarian, state, private and social cooperative forms of economic organization, and prioritizes domestic investment over foreign investment. Market-based competition 4

16 BTI 2014 Bolivia 16 In principle, Bolivia s laws call for resisting the formation of monopolies and oligopolies, but the regulations have for many years been implemented rather inconsistently. Between 1985 and 2005, many new monopolies or oligopolies were formed at the regional or sectoral level, such as in the media sector or by the processes of privatization. Since 2006, the return to stronger state intervention has manifestly favored state and parastatal monopolistic tendencies. There is still no competition law or law on mergers. However, the 2009 constitution prohibits private monopolies and oligopolies, and specifically large land holdings (the latifundio), establishing an absolute limit of 5,000 hectares. Foreign trade was deregulated after 1985 and was liberalized and diversified throughout the 1990s. The change in economic policy since 2005 has affected foreign investment without adversely impacting on trade. The degree of trade freedom, according to The Heritage Foundation s Index of Economic Freedom, initially increased under the Morales government, but in recent years has declined again. Bolivia s weighted average tariff rate is 5.4%. However, there are quite a large number of non-tariff barriers, including import bans and restrictions and domestic preferences in government procurement, all of which constrain market access. Anti-monopoly policy 6 Liberalization of foreign trade 6 Bolivia is a member of the WTO and the Andean Community (CAN), and is an associate member of Mercosur. The Morales government is critical of free trade agreements, although it is not opposed to trade treaties in principle. On the one hand, the government ended trade negotiations with the United States and the European Union (within the CAN framework). On the other hand, Bolivia joined the Peoples Trade Treaty, originally negotiated between Cuba and Venezuela. Following a crisis in bilateral relations that included mutual expulsion of their respective ambassadors, the U.S. government in 2008 suspended Bolivia s inclusion in the Andean Trade Promotion and Drug Eradication Act (ATPDEA), thereby revoking a number of trade preferences. These political developments have reinforced a trend toward the diversification of trade partners: While the share of Bolivian exports to North America and Europe has declined from more than 56% in 1999 to less than 17% in 2008, the proportion of exports to Latin America (Brazil in particular) and the Asia Pacific region has increased significantly. Bolivia s banking system and capital market are differentiated, open and internationally oriented, but still subject to fluctuations due to a lack of oversight and a high dependency on foreign markets. According to The Heritage Foundation (in its 2010 Index of Economic Freedom), there are 12 commercial banks in Bolivia, three of which are foreign-owned, and 45 non-bank financial institutions. Since 2002, the share of nonperforming loans as a percentage of banks total gross loans has declined continuously, from 17.7% to 2.0% in 2011 (World Bank data). The bank capital-toassets ratio, however, has also declined (from 11.9% in 2002 to 8.5% in 2011). Given Bolivia s limited integration into the international capital market, the recent global Banking system 7

17 BTI 2014 Bolivia 17 financial crisis did not directly affect the country, but instead had indirect effects in the form of temporarily declining commodity prices and remittances. 8 Currency and Price Stability The governments of the past two decades have on the whole pursued a consistent policy on inflation and an appropriate exchange rate policy. During the Morales administration, countercyclical monetary and exchange-rate policies have generally corresponded well to the government s overall economic policy. For 2012, CEPAL estimated consumer price index inflation to have fallen to 4.3% (from 6.9% in 2011). The central bank continued its crawling-peg regime of (unannounced) incremental adjustments in the exchange rate vis-à-vis the dollar and generally responded successfully to external inflationary pressures. International reserves, which have soared since 2005, continued to expand and, in January 2013, exceeded USD 14 billion. Reflecting public confidence in the domestic currency (and deliberate policies by the central bank), de-dollarization of the financial system has continued: According to CEPAL data for September 2012, about 70% of deposits and 78% of credits were in national currency, historically unprecedented levels. Bolivia s central bank is not independent, but according to the 2009 constitution the executive sets monetary and exchange rate policy objectives in coordination with the central bank. Between the late 1980s and 2005, Bolivian governments were committed to fiscal and debt policies aimed at macroeconomic (especially monetary) stability; they even implemented strict austerity measures during some periods. In terms of overall priorities, this has changed since Yet despite the new emphasis on social policies and public investment, the Morales government to date has stuck to a consistent policy of stability (an exception being the prudent decision not to resort to austerity measures to fight the externally driven hike in inflation in 2008 and 2009). Based on high commodity prices and increased revenues from gas exports due to the hydrocarbons law and nationalization policy, continuous budget deficits between 2000 and 2005 have been transformed into fiscal surpluses since In 2011, according to CEPAL, the non-financial public sector surplus was 0.9%. However, the general government budget ran at a deficit (for the first time since 2005), in particular because of increased (capital) spending for the government s public investment program. In 2011, the surplus in the current account balance shrank (due to a rise in domestic demand), but again improved markedly in As stated above, international reserves continued to set new records. Since 2003, Bolivia s public and external debt levels have fallen. In mid-2012, external public debt amounted to 11.2% of GDP. Increased international confidence in Bolivia s macroeconomic stability was confirmed by the country s return to the international financial markets: In October 2012, Bolivia successfully issued USD 500 million in sovereign debt bonds. Anti-inflation / forex policy 8 Macrostability 8

18 BTI 2014 Bolivia 18 9 Private Property The 2009 constitution guarantees the right to private property, provided that it performs a social function, and provides for prior just compensation in cases of expropriation. This is not significantly different from the constitutional status quo ante and is entirely in line with the notion of a social market economy. Nevertheless, guarantees of property rights are not implemented consistently or safeguarded against state intervention. In recent cases of expropriation, appropriate compensation was not guaranteed by well-defined procedures and transparent criteria, but emerged from negotiations. With a view to land tenure, the new constitution deliberately limits the right to private property by establishing an absolute limit of 5,000 hectares (which is not, however, applied to already existing agrarian property). Land not fulfilling a social-economic function can be confiscated. The implementation of agrarian reform is a heavily contested process and shaped more by political struggles than by legal procedures and reliable dispute settlement. Private companies are permitted and in principle can act freely, but bureaucratic and political limitations exist. Under the Morales government and the 2009 constitution, private enterprise has lost its former status as the primary engine of economic development. Public companies in particular have gained importance in quite a few sectors. Privatization is no longer a political strategy, and the privatization process (which began in 1985) has been partially reversed. However, nationalization even in the hydrocarbons sector has not led to total state domination of strategic sectors, but instead to new forms of cooperation between public and private (foreign) companies featuring significantly increased participation and control by the state. In addition, Bolivia s regulatory environment has historically been regarded as relatively restrictive for private business (see, for example, the World Bank s Doing Business reports). Property rights 5 Private enterprise 4 10 Welfare Regime Social safety nets are fragmented, and coverage is not distributed equally. In recent years, the government has tried to address all three of the principal problems of the country s mechanisms of social provision: by modernizing the theoretically welldeveloped, but highly inefficient traditional system of social security; by extending coverage to the great majority of people who are not yet included, particularly in rural areas; and by fighting poverty among the lower-paid strata of workers (formal and informal) and marginal self-employed. Since 2006, the Morales government has regularly increased the minimum wage and has introduced a series of anti-poverty programs. Since 2006, a conditional cash transfer ( Bono Juancito Pinto ) is awarded once a year to children in return for continuing education through the sixth grade of primary school. In 2008, a tax-financed, non-contribution-based state pension for all Social safety nets 5